Must an estate or trust recompute the alternative minimum tax on its 2005 federal Form 1041 to figure the Nebraska minimum tax, and which Schedule I lines change?

Plain-English summary

When an estate or trust owes federal alternative minimum tax (AMT) for 2005, Nebraska imposes its own Nebraska minimum tax — but the federal figure has to be recomputed under Nebraska rules first. This ruling is the year-specific worksheet for 2005 fiduciaries (estates and trusts). It mirrors the individual version, Revenue Ruling 22-05-1, but works off Federal Form 1041, Schedule I.

Why recompute. Under Neb. Rev. Stat. § 77-2717, the fiduciary's additional taxes (including AMT) are recomputed by substituting Nebraska taxable income for federal taxable income and adjusting for items reflected differently for Nebraska. The § 77-2716 adjustments include:

• excluding interest or dividends from U.S. obligations (per Fiduciary Income Tax Regulation 23-004.03A);
• including interest or dividends from non-Nebraska state or local obligations; and
• excluding any non-Nebraska income from an S-corporation or LLC, along with any related AMT preference item to the same extent.

The 2005 line-by-line substitutions. Recalculate all total/computational lines; keep the rest the same as the federal AMT computation. On the 2005 Federal Form 1041, Schedule I:

• Part I: Line 1 — reduce the federal entry by lines 3 and 8 of Form 1041N and add the line 5 amount; Line 7 — Nebraska-adjusted NOL deduction; Line 8 — tax-exempt interest only from Nebraska private activity bonds issued after August 7, 1986; Line 14 — make no state adjustment for federal special bonus depreciation; Line 24 — Nebraska-adjusted alternative tax NOL deduction.
• Part II: Line 31 — tax-exempt interest from Nebraska bonds (other than amounts on line 8).
• Part III: Line 52 — exclude capital gains that were excluded on line 8 of Form 1041N; Line 53 — enter zero; Line 55 — recompute the regular federal income tax before credits on the Line 1 income, without subtracting any foreign tax credit.

Where the result goes. Follow the federal instructions through Part III, line 56 of the recomputed Schedule I, then enter that line 56 on the Nebraska Minimum or Other Tax Worksheet. Complete the worksheet to get the amount for line 11 of the 2005 Form 1041N, and attach the recomputed Schedule I to the return.

The add-on minimum tax and AMT are recomputed for all tax years beginning after December 31, 1978. The ruling was dated January 18, 2006 and approved January 30, 2006.

What this means for you

Fiduciaries filing a 2005 Nebraska Form 1041N with federal AMT

Rebuild Schedule I of Form 1041 using Nebraska income and the adjustments above — pulling out U.S.-obligation interest and non-Nebraska S-corp/LLC items, ignoring federal bonus depreciation for state purposes — carry line 56 through the Nebraska Minimum or Other Tax Worksheet, and report the result on line 11 of Form 1041N. Attach the recomputed Schedule I.

Fiduciaries for a different tax year

This ruling is specific to 2005, and the Schedule I line numbers shift year to year. For 2004, 2003, and 2002 the Department issued Revenue Rulings 23-04-1, 23-03-1, and 23-02-2; use the ruling that matches your actual tax year.

Common questions

Q: Can an estate or trust just use its federal AMT for Nebraska?
A: No. Federal Form 1041, Schedule I, must be recalculated for Nebraska to determine the Nebraska minimum tax.

Q: Does Nebraska adjust for federal bonus depreciation here?
A: No. On Part I, line 14, make no state adjustment for any federal special bonus depreciation.

Q: Where does the recomputed AMT land on the 1041N?
A: The recomputed Part III, line 56, feeds the Nebraska Minimum or Other Tax Worksheet, and the result goes to line 11 of the 2005 Form 1041N.

Q: How is this different from the individual AMT ruling?
A: It applies to estates and trusts and is authorized by Neb. Rev. Stat. § 77-2717 (the individual version, Revenue Ruling 22-05-1, is under § 77-2715).

Citations and references

• Neb. Rev. Stat. § 77-2717 -- fiduciary additional taxes (including AMT) recomputed by substituting Nebraska taxable income for federal taxable income.
• Neb. Rev. Stat. § 77-2716 -- Nebraska adjustments (U.S.-obligation interest excluded; non-Nebraska state/local obligation interest included; non-Nebraska S-corp/LLC income excluded).
• Fiduciary Income Tax Regulation 23-004.03A -- exclusion of interest or dividends from U.S. obligations.
• Prior-year companions -- 2004: Revenue Ruling 23-04-1; 2003: 23-03-1; 2002: 23-02-2.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr230501.pdf

Original ruling text

REVENUE RULING 23-05-1
January 18, 2006
Fiduciary Income Tax-Computation of 2005 Alternative Minimum Tax to Determine Nebraska
Minimum Tax for the 2005 Nebraska Return. ALTERNATIVE MINIMUM TAX-FIDUCIARIES,
FEDERAL FORM 1041, SCHEDULE I, IS TO BE RECALCULATED FOR NEBRASKA
FIDUCIARY INCOME TAX PURPOSES TO DETERMINE THE NEBRASKA MINIMUM
TAX.
Advice has been requested as to whether the alternative minimum tax computed for a taxpayer’s
2005 U.S. Fiduciary Income Tax Return, Federal Form 1041, Schedule I, must be recalculated in
order to compute the Nebraska income tax.
Nebraska law imposes a tax on the federal alternative minimum tax recomputed to take into account
the adjustments required by the Nebraska Revenue Act of 1967, as amended. Section 77-2717 of the
Nebraska Revised Statutes provides that the additional taxes shall be recomputed by substituting
Nebraska taxable income for federal taxable income and adjusting the Nebraska alternative
minimum tax calculations for any items which are reflected differently in the determination of
federal taxable income for Nebraska purposes. This applies to any federal schedules or other forms,
the results of which are used in calculating the federal alternative minimum tax.
For instance, Section 77-2716 of the Nebraska Revised Statutes provides for the exclusion from
taxable income of interest or dividends from U.S. obligations as set forth in Fiduciary Income
Tax Regulation 23-004.03A and the inclusion of interest or dividends from non-Nebraska source
state or local obligations. Section 77-2716 also provides for the exclusion from Nebraska taxable
income of any non-Nebraska income from an S-corporation or LLC. Therefore, any associated
preference item derived from the S-corporation or LLC included in the alternative minimum tax
calculations should be excluded to the same extent in the Nebraska computation.
The specific line entries and the required adjustments in recomputing the minimum tax for the 2005
Nebraska Fiduciary Income Tax Return, Form 1041N, are provided below. Recalculate all total
or computation lines to reflect adjustments made pursuant to this ruling. All other entries
must be the same as for the federal minimum tax computation.
2005 Federal Form 1041, Schedule I:
Part I:
Line 1. Reduce the federal entry by the amounts on lines 3 and 8 of Form 1041N and add the
line 5 amount from Form 1041N.
Line 7. Enter the net operating loss deduction as adjusted for Nebraska purposes.
Line 8. Enter the tax-exempt interest only from Nebraska private activity bonds issued after
August 7, 1986.
Line 14. Do not make any state adjustment for any federal special bonus depreciation.
Line 24. Enter the alternative tax net operating loss deduction as adjusted for Nebraska
purposes.
Part II:
Line 31. Enter the tax-exempt interest from Nebraska bonds (other than amounts included on
line 8 ).
Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 23-05-1

January 18, 2006

Page 2 of 2

Part III:
Line 52. If Part IV of Schedule I, 2005 Federal Form 1041, was used to make the line 52 entry,
exclude any capital gains in the calculation that were excluded on Line 8 of Form 1041N.
Line 53. Enter zero.
Line 55. Compute the regular federal income tax before credits on the Line 1 income as entered
above. The same federal tax method used to complete line 23, Federal Form 1041, is to be used.
Enter the computed amount without subtracting any foreign tax credit.
Follow federal instructions to recompute the alternative minimum tax through Part III, line 56 of
Schedule I, Federal Form 1041.
Enter line 56, Part III, of the recomputed Schedule I, 2005 Federal Form 1041, on line 1 of the
Nebraska Minimum or Other Tax Worksheet. Complete the worksheet to determine the amount to
enter on line 11 of the 2005 Form 1041N.
The recomputed Schedule I, Federal Form 1041, must be attached to the 2005 Nebraska Fiduciary
Income Tax Return, Form 1041N, when filed.
The add-on minimum tax and the alternative minimum tax are to be recomputed for all taxable years
beginning after December 31, 1978. The specific line entries on Federal Form 1041, Schedule I,
that are to be altered in the recomputation for Nebraska are provided for the following tax years:
Tax Year
Revenue Ruling
Reference
2004
23-04-1
2003
23-03-1
2002
23-02-2
APPROVED:

Mary J. Egr Edson
State Tax Commissioner
January 30, 2006